NUCLEAR TIMES EUROPE Tuesday June 7 2011
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FINANCING NUCLEAR TIMES EUROPE Tuesday June 7 2011 For sale: One discredited nuclear industry. Will ECA’s: stuck in a nuclear rut and deaf to the alternatives ship anywhere. Finance available Analysis, Page 7 Noriko Shimizu, Page 8 World Destroying Guarantees they predict, could “bring even the interest rates on the money markets. largest utility company to its knees Towards the end of the 1970s, some News Briefing financially”. The authors stress that countries began to complain about Nuclear – a nowhere in the world have nuclear the very generous support schemes Switzerland: The Swiss fed- power stations been built on the basis that some other states provided to eral government has agreed that the private sector will shoulder their domestic companies, claim- to gradually decommission publicly subsidised the three main risks (construction, ing that this was distorting the mar- the country’s nuclear power power price and operational) unaided. ket. At the OECD, the industrialised stations. Under the plan, Their conclusion is that new nuclear countries negotiated a framework of the five nuclear installations power plants will only be commis- conditions for “the orderly use of of- love affair 1 4 will not be replaced when pay taxes on the fuel rods they used. sioned in the UK if public funding ficially supported export credits” they reach the end of their By Regine Richter in Berlin These subsidies have been essential to is provided. As they put it: “Financ- the so-called Arrangement. It aims lives. A final decision and the growth of the industry, as enor- ing guarantees, minimum power to foster a level playing field for timeline should be agreed Nuclear power is not only the most mous cost overruns have been the prices, and/or government-backed officially-supported export credits by the Swiss parliament in controversial and dangerous method rule, not the exception, for the con- power off-take agreements may all and guarantees. It is a gentlemen’s mid-June. of generating energy, it is also one struction of nuclear power plants, be needed if stations are to be built.” agreement between the participants. of the most expensive. The technol- in all countries and every decade. A However, even with this kind of state Pay back later, and later, and later Germany: The German ogy would never have achieved the 1986 study by the US Department of support, it is a moot point whether The importance of ECAs for nuclear government has agreed on a geographical penetration it has to- Energy looking into 75 of the coun- the projects are financially viable, as development is illustrated by the spe- roadmap for the phase out of day without massive public fund- try’s 104 reactors found that they had the US experience illustrates: “The cial provisions for the industry in the nuclear power. The coun- ing. While, in the 1960s, enthusi- a total predicted cost of US$45 bil- proposed nuke plants in our coun- OECD Arrangement. It allows longer try’s 17 plants will go offline asts predicted that electricity from lion, while the actual cost turned out try are promised billions of dollars in repayment terms for nuclear power sta- by 2021. The government nuclear power would be too cheap to be US$145 billion — three times loan guarantees from the government, tions than for conventional power sta- largely followed the recom- to meter, in fact, to survive, the in- higher than the initial estimates.2 Two and additional support from the ex- tions. The justification given was that mendations of an ethics dustry has always depended upon decades later, in 2005, an assessment port credit agencies (ECAs) of Japan the longer repayment terms reflected commission which said it manifold forms of public subsidy. of the Indian nuclear programme and France. And yet still they cannot the fact that nuclear power plants was possible to end nuclear Greenpeace Germany documented showed that the completion costs for manage to finance them — it’s just too needed a longer period before gen- power in Germany within a all the subsidies for German nuclear their last 10 reactors have been, on risky, therefore too un-economical,” erating enough income to pay off the decade. technology. In their report of Octo- average, 300 per cent over budget.3 explains Doug Norlen of the US en- debt.The nuclear industry suffers from ber 2010, they revealed that, between New Nuclear – Economics Say No vironmental organisation Pacific En- a structural handicap. It seems that it Italia: The Council of Minis- 1950 and 2010, nuclear technology in Nor does the future look bright: Citi- vironment. One has to bear in mind is not following a “learning curve” that ters has approved a mora- Germany benefited from at least €203 group Global Markets published a pa- that the profitability will only become you would expect to observe in tech- torium of at least one year billion of support. This figure com- per in November 2009 entitled, “New worse as, post-Fukushima, safety re- nology-based industries as they ma- on construction of nuclear prises: research funding; the running Nuclear – The Economics Say No”. The quirements become more stringent. ture: learning how to minimise prob- power plants in the country. costs of the unstable and problem- paper examines the situation in the Nuclear export promotion lems and thus being able to produce atic waste disposal sites at Asse and UK, where the government wants to State aid has not only underpinned at lower cost, so improving the rate of Finland: The flagship Morsleben; the decommissioning of build several new NPPs and has an- national nuclear programs. Govern- return. This lack of a learning curve EPR project at Olkiluoto, East German nuclear power plants; nounced a fast-track planning process ments with a domestic nuclear in- was taken into account during the managed by the largest and contributions to Euratom and for these new stations. However, Citi- dustry have been busy helping their last amendments to the Arrangement nuclear builder in the world, other international nuclear organisa- group identified five big risks: plan- companies to find new markets, and in 2009, when the maximum repay- AREVA NP, has turned into tions. Another form that subsidy takes ning; construction; power price; op- supporting their exports. In the 1960s ment period for nuclear power plants a financial fiasco. The project is tax breaks: accruals (the money erational; and decommissioning. Of and 1970s, this was done, fairly blatant- was prolonged from 15 to 18 years. is four years behind schedule nuclear companies have to set aside these they identify three “corporate ly, using overseas development budg- And so continues this semi-con- and at least 90 per cent for decommissioning) are not liable killers”: construction, power price ets, sometimes combined with export cealed system of subsidies for a dan- over budget, reaching a total for tax; the company can neverthe- and operational risks. Each of them, credits. When aid money for nuclear gerous and expensive technology, cost estimate of €5.7 billion less use the funds in the meantime became a more problematic issue, the that obstructs and distracts from the ($8.3 billion) or close to for enterprise purposes. Finally, un- 1 “Subventionen der Atomenergie“, Green- ECAs became a very important tool desperate need to make a systemic, €3,500 ($5,000) per til 2006, unlike other energy sources, peace, Oktober 2010 for promoting nuclear exports. They strategic move to a decentralised, ef- 2 “The economics of nuclear power“, Green- provided either export credits or ex- ficient and renewable energy system. kilowatt. nuclear fuel was not taxed, meaning peace, November 2007, p.3 that energy companies did not have to 3 “Nuclear Banks, no thanks“, Banktrack, port credit guarantees, the latter al- Greenpeace, urgewald, CRBM et al, May 2010, lowing the company to obtain lower 4 “Arrangement on officially supported export p.8 credits“, OECD, July 2009 revision, p.5 export deal unprofitable. In such cir- What are Export cumstances, and only in such circum- Credit Agencies? stances, official ECAs are allowed to Export Credit Agencies, commonly offer support from the public purse. known as ECAs, are public agencies Export guarantees are critical to and entities that provide government- financing trade with the developing backed loans, guarantees and insur- world. A recent report estimates the top ance to companies from their home ECAs backed more than $260 billion country seeking to do business overseas of business in 2008. Without ECA sup- in developing countries and emerging port, many deals would not go forward markets. – or would be lost to competitors. ECA Export guarantees work like any business increased by a third in the im- other form of insurance, only in this mediate aftermath of the credit crunch, case is being insured the risk that a saving many exporters. company will not be paid for the goods ECAs are collectively the largest that it has exported. In return for a pre- source of official financing for develop- mium, the ECA undertakes to ensure ing countries. They are implicated in that the exporter gets paid should the environmental, social and economic buyer default. problems ranging from climate change, Because exporting to many develop- unsustainable debt, corruption and ing countries is considered to be high- other problems plaguing countries risk business, private sector insurers are where they do business. often unwilling to cover exporters – or http://www.eca-watch.org/ charge premiums that would make the Nuclear News: the 60s and 70s in Canada Crippling losses and cor- ruption: nuclear exports Canadian-style By Deborah Lambert-Perez in US$15 million were also supplied by Brussels Babcock & Wilcox Canada.8 Repairs delayed the project for over a year and Export Development Canada (EDC) the sale was controversial because guarantees have underwritten the ex- bribes in the form of ‘agent fees’ were port by Atomic Energy of Canada Ltd paid to secure the contract.9 An Ar- (AECL) of nuclear technology in deals gentine investigation in 1985 revealed based on bribery and backhanders.